Blog

The Next Industrial Revolution

In the
post-recession economy, businesses are laser focused on using technology and
innovation to do more with less. This mandate for greater efficiencies can be
seen in the industrial real estate market as well, where developers are using
leading-edge technology as they design and build warehouse and manufacturing
space to reduce construction costs, maximize space, streamline operations and
take energy efficiency to the next level. These aren’t your grandparent’s dark,
dusty warehouses. The industrial buildings of the 21st Century are wonders of
engineering, filled with natural light, high-tech inventory systems and
eco-friendly energy procedures.

THE BUILDING BLOCKS

It all
starts from the ground up, with the use of high-performance building materials,
built-in energy efficiencies and lots of natural light.

The
changes are dramatic, says Jarrod Hunt, senior vice president of
industrial services for CBC Advisors. “The new technology in
lighting, heating and base building materials has changed construction, making
buildings much more efficient—giving the finished building a longer physical
lifespan, utilitarian function and reduction in operational costs for the tenants
in the long term.”

One
notable change is the trend toward use of more natural light. Tenants want to
create comfortable work environments for their people and they increasingly
want to be more ecofriendly. So developers are incorporating higher ceilings,
more windows, lighter interior colors and natural light into their buildings.

“Those
concepts were not seriously considered 10 to 20 years ago,” says Hunt. “I have
sold buildings where you walk in and wouldn’t know the lights are off because
of the amount of natural light. With enough prismatic skylights, it appears all
of the lights are on in the building during normal business hours, when in
actuality the lights may be off.”

Developers
are starting to incorporate more solar power and other renewable energy
sources. Many tenants like the idea of generating more power onsite, so
developers will keep adding solar to buildings as the demand grows. A popular
trend utilizes the adjacent vacant land to connect buildings with commercial grade
wind turbines, virtually placing the property off-grid.

Thanks
to advances in construction materials and techniques, many new industrial
buildings feature high-performance floors made from concrete with high-tech additives,
fiberglass mesh and special hardeners. This creates a durable, smooth floor
that will outperform the concrete floors typical of 20th century. Building
insulation has also been improved, says Hunt. “The trend to use high-density
foam insulation provides much greater performance than the old fiberglass batting
of yesteryear—with the added benefit of improved aesthetics, clean-ability, and
light reflection from the white vinyl backing.”

The same
is true for roofing materials that are designed to reflect the heat, rather
than the old black tar roofs that tend to collect heat and drive it into the
building. New thermoset membrane and thermoplastic sheet materials wear
superior to comparable metal or tar style roofing systems when faced against
climate, application and environmental conditions.

Hunt
says developers are also incorporating low-speed, high-volume fans in the
ceilings of their buildings to keep air moving, which makes the buildings more
comfortable and the temperature more consistent throughout the day.

“That’s
a big trend,” he says. “Almost all of the new warehouses and industrial buildings
have these low-speed, high volume fans that are 10 to 12 feet across. Tenants
love them. They are very efficient to operate, have a long lifespan and provide
great payback to the building occupants that put them in.”

Developers
are also more widely adopting radiant heat in the floors and ceilings of their
buildings, rather than the traditional gas-fired unit heaters that blow warm
air throughout the entire building envelope. These radiant heaters better
isolate the areas that need a higher human heat range in a building, so they don’t
waste energy heating an entire building when workers may only occupy about 15
to 20 percent of the space.

INTERNAL DYNAMICS

Beyond
the physical building, new technology is changing the way managers store,
track, handle and move inventory—and these changes also impact the development
of next-generation industrial space. For example, products shipped from
overseas normally arrive in 20-foot or 40-foot containers, creating a demand
for dock-high doors, even from smaller customers.

“With
dock-high doors, the tenant can leave a container docked up to a door for an
extended period of time, which gives them greater flexibility and makes material
handling and truck scheduling more efficient,” Hunt explains.

With the
ability to run a forklift or a pallet jack into the back of the container, companies
aren’t forced to unpack by hand and re-palletize the materials or product in
the warehouse. It also becomes a worker safety issue. Anytime repetitive motion
or awkward lifting motions can be reduced or eliminated, worker injury claims
and lost work times dramatically drop. Dock- high doors also greatly reduce the
labor costs often hidden in warehouse operations.

In many
cases, these reduced costs can easily offset the perceived expenditures of a
new modern space that accommodates efficient operational models.

New
technologies are also helping companies maximize the use of their space. For example,
Roderick Enterprises, one industrial developer in Utah’s North Pointe Business
Park, reconfigured the column spacing in their latest building to accommodate a
narrow rack layout. By moving the column spacing from a typical 50-foot column grid
to a 56-foot column grid, the developer lined up the rack space better, which
will allow the tenant to utilize the space more efficiently.

“If a
tenant were to adopt the racking layout that the 28-foot-tall building was designed
for, the tenant could actually put approximately 25-40 percent more product per
square foot into the building. Thinking in terms of cost-per-pallet position is
more important than always being focused on cost per square foot when comparing
warehouse buildings. The difference can be dramatic, which is all dollars at
the bottom line.” Hunt says.

This trend
toward narrow and very narrow aisle configurations wouldn’t be nearly so
popular without technological developments in lift trucks and order picker
vehicles, which can operate in aisles as narrow as five and a half feet—or less
for the order picker vehicles.

Improvements
in inventory tracking technology have also led to a demand for greater internet
connectivity from the warehouse floor. Workers rely on fiber optic or broadband
internet connectivity inside and outside the building to communicate with the
main office or track product throughout the building via radio-frequency
identification (RFID) tags and readers. Logistics managers can accurately track
and verify product quantity and location real time, and RF temperature sensors
can remotely alert the quality assurance team if a product is close to falling
outside the preset parameters.

“We’re
seeing a trend by developers to put a lot more technology into their buildings,”
says Hunt. “Tenants want to know exactly where their products are at all times,
and want them to be traceable. The tenants are forced to work with a higher
level of inventory management control as a result of increased product volumes
and greater competition in the world today.”

In the
past, a developer may not have cared much about bringing broadband into a
building because no one was asking for it. “Now everyone is asking for it and
developers are spending extra money to pull fiber into their buildings to
accommodate the demand,” Hunt says.

A STRONG FOUNDATION

Still,
adopting technology trends is a gradual process, and most industrial buildings
haven’t adopted every new technology. Hunt says developers still have to
balance the addition of new technology with the financial returns the market
will give them. While some tenants are willing to pay extra for technology, if
it only offers marginal value, other tenants don’t want it.

“For
developers, it is a balancing act that takes some education on the part of prospective
tenants to understand the cost versus benefit equation,” he says. “It’s a
process that continually changes as innovation creates possibilities that were
never possible before.”

Guest post
contributed by CBC Advisors. CBC Advisors has been the top performing Coldwell
Banker Commercial office globally for the past 12 consecutive years. To inquire
about industrial properties or to learn more about CBC Advisors visit www.cbcadvisors.com.